US stocks were hammered on Thursday as the latest AI spending outlooks from Alphabet (GOOG) and Tesla (TSLA) spooked investors, and oil prices surged above $100 in the wake of expanded attacks in the Middle East.
The Nasdaq Composite (^IXIC) suffered the worst of the losses, tumbling 2.1% and briefly breaking below 25,000 for the first time since May.
The Dow Jones Industrial Average (^DJI) dropped 0.9%, meanwhile, and the S&P 500 (^GSPC) fell by 1.2%, building on a stock retreat on Wednesday amid a flurry of earnings reports.
Big Tech stocks sold off, led by declines in Alphabet and Tesla shares after the two “Magnificent Seven” heavyweights reported results after Wednesday’s market close.
Alphabet posted a strong quarter fundamentally, but the Google parent’s raised capex outlook comes as investors scrutinize AI’s return on investment. Tesla CEO Elon Musk also said 2026 would be a “massive capex year” for the company, highlighting a focus on Optimus robots, robotaxis, and data centers.
The latest escalation in the Middle East, meanwhile, shows no signs of relenting, and oil prices continued to climb on Thursday. Brent crude (BZ=F) oil futures, the international benchmark, crossed the key $100 level. West Texas Intermediate futures (CL=F), the US benchmark, also rose after Iran-backed Houthis said they had attacked tankers in the Red Sea.
As the US-Iran war has widened, rising oil prices spurred a sell-off in bonds, sending the 10-year (^TNX) to its highest level in a year and a half amid renewed inflation concerns. The latest pressure from oil has pushed back against easing bets that the Federal Reserve would hike interest rates this year.
On the economic data front, initial jobless claims unexpectedly dropped to their lowest level since 1969. Claims fell to 187,000 for the week, against expectations of 210,000 first-time claims. In the corporate world, a raft of earnings awaits investors, including from Intel (INTC), T-Mobile US (TMUS), Lockheed Martin (LMT), and others.